This might be a tad too ambitious for my second post here. The economy is pretty much the most complicated thing there is, and I am so very dumb. I tend to think that just about every one else I know is exactly as dumb as I am when it comes to the economy. But, for some bizarre reason, that doesn’t stop them from having an opinion on it.
When I was a child I labored under the belief that Republican leadership was generally ‘good’ for the economy, while the Democrats were ‘bad’ for it. My dad explained that Republicans favor policies like tax cuts that encourage economic growth, while Democrats like to raise taxes and inhibit growth. Anomalies like the Clinton Boom were brushed away by explaining that Reagan’s policies had been responsible for the ragin’ 90s. Even as I got older and more liberal, I still believed that Republicans were better at making the country money. Why else would big business love them so much?
So we’ll start with the simple question: Does the party in power have any influence on the economy? This paper from the University of Nevada (PDF) set out to answer just that question. They poured through annual data collected by the Department of Commerce since 1929 to look at how the economy has fared under either party.
“…the economy has grown significantly faster under Democratic administrations, and more than twice as fast in per capita terms.”
That sounds like an open-shut case. But that whole ‘great depression’ and ‘second world war’ thing probably inflated things for the Democrats. So what happens when we look at only the data past 1949?
Well…pretty much the same thing. Adjusted for inflation, we see real weekly wages rise, unemployment drop, growth rise and even corporate profits rise.
But hey, most of those Democratic presidents were preceded by Republican presidents. How can we know they weren’t just reaping the benefits of lagged conservative policies? Well, our friends in Reno accounted for that too. Even if you credit Republican policies with being responsible for a lag of up to four years, the Democrats still come out on top.
Now it’s critical to keep in mind that correlation does not equal causation. This data should not be used to argue that Democrats cause the economy to boom while Republicans collapse it. But this data does make a convincing case against the old argument that conservative leadership improves the economy. Put simply, there is no evidence that this is the case.
So let’s move on to the next big complaint against Democratic presidents: they spend like Rick Ross in a Florida strip club. That’s the argument I heard over and over again as a kid. Whenever the Democrats are in power they run up the deficit, what with their love of big government. If we could just get back to those good old Reagan era fundamentals we’d have this whole ‘debt’ thing cleared up in no time.
Balls. Once again, the data supports exactly the opposite. While our own Mr. Obama has presided over a substantial debt boom, we can clearly see that Nixon, Reagan and the Bushes are responsible for the vast majority of our nation’s debt. In other words, there is indisputable mathematical evidence that Republicans consistently build more debt than Democrats.
Since 1938, the debt has risen by an average annual rate of 8.3% under Democrats, which is admittedly pretty bad. But under Republicans it raised an average of 9.2% per year. That isn’t a huge difference, but it throws more water on the argument that Republicans are somehow better at managing our nation’s money. But hey- debt isn’t everything. Republicans are the party of business. They may spend the government dry, but at least the people have more money when an elephant sits in the White House.
If you’ve got any sort of pattern recognition, you know a big hairy “but” is coming up next. Over the last six Democratic terms the Dow rose by 247.9%. Over the last seven Republican terms, it only grew by 147.1%. On average, Democrats grow the Dow by 41.3% per term, while Republicans only grow it by 21%. Under Ronald Reagan, the perfect conservative, corporate profits increased by $143.5 billion. But under Clinton, they rose by $326.6 billion.
I hate it when people throw out a list of numbers with no context or analysis and then claim ‘checkmate’ on an argument. But not nearly as much as I hate it when people make an argument like, “Republicans are better for business” or “conservative policies grow the economy” and then back it up by claiming to speak from simple common sense. The economy does not run on common sense. Sound economic policy is often counter-intuitive and always incredibly confusing. Anyone who claims to have a simple answer to our fiscal woes should be immediately disregarded as crazy at best, and outright lying at the worst.
Numbers don’t necessarily tell us the truth, but they’re pretty damn good for revealing lies.